Zoom Imaging Solutions, Inc. v. Roe

[7] 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- [11] 12 ZOOM IMAGING SOLUTIONS, INC., No. 2:19-cv-01544-WBS-KJN 13 Plaintiff, 14 v. MEMORANDUM & ORDER RE: MOTION TO DISMISS 15 EDWARD ROE; MAXWELL RAMSAY; JON CROSSEN; CORINNE FUEREST; ANDREW 16 ALSWEET; KEVIN TOON; JASON PEEBLER; ABIGAIL NEAL; POWER 17 BUSINESS TECHNOLOGY LLC; and DOES 1 through 100, inclusive, [18] Defendants. [20] ----oo0oo---- [21] 22 Plaintiff Zoom Imaging Solutions, Inc. (“Zoom”) brings 23 this action against defendants Edward Roe, Maxwell Ramsay, Jon 24 Crossen, Corinne Fuerest, Andrew Alsweet, Kevin Toon, Jason 25 Peebler, Abigail Neal, Power Business Technology LLC (“Power”), 26 and Does 1 through 100, alleging that defendants accessed and 27 used Zoom’s confidential information to build and develop 28 competitor Power’s business, in violation of defendants’ 1 employment agreements, as well as state and federal law. Before 2 the court is defendants’ Motion to Dismiss. (Docket No. 23.) 3 I. Relevant Allegations 4 Zoom provides printing and imaging services to 5 commercial businesses. (Compl. at 3, ¶ 19.) Zoom’s services 6 include the sale, installation, and servicing of digital print 7 and copy systems, print services, and software solutions. (Id.) 8 Zoom develops, acquires, and maintains business 9 information related to its customers, including pricing 10 information, customer preferences and contract renewal 11 information, as well as Zoom’s business, sales, and marketing 12 strategies (collectively the “Confidential Information”). 13 (Compl. at 4, ¶ 23.) Zoom’s success is attributable to its use 14 of this information. Zoom therefore invests substantial time, 15 money, and effort developing, acquiring, and maintaining this 16 information. (Compl. at 4, ¶¶ 21, 22.) 17 The Confidential Information is not generally known. 18 (Compl. at 4, ¶ 25.) Because it gives Zoom a competitive 19 advantage over persons not in possession of this information, 20 Zoom uses reasonable and diligent efforts to maintain and protect 21 the Confidential Information. (Compl. at 4, ¶¶ 24, 27.) Such 22 protection includes multiple levels of restricted access. 23 (Compl. at 11, ¶ 55.) 24 Defendant Power is a competitor of Zoom founded by 25 defendant Roe. (Compl. at 8, ¶ 48.) All other named defendants 26 (collectively the “Individual Defendants”) worked for Zoom in 27 various capacities: Roe worked for Zoom as President (Compl. at 28 4, ¶ 28); Peebler as Vice President of Sales (Compl. at 5, ¶ 34), 1 Ramsay and Crossen as Regional Sales Managers (Compl. at 5, ¶¶ 2 29, 31); Toon and Neal as Account Executives (Compl. at 5, ¶¶ 33, 3 35); Alsweet as a Senior Account Manager (Compl. at 5, ¶ 32); and 4 Fuerst as Zoom’s Leasing Administrator. (Compl. at 5, ¶ 30.) 5 In 2017, Roe signed an Executive Agreement (“2017 6 Executive Agreement”) where he promised to refrain from using 7 Confidential Information to solicit Zoom’s customers or employees 8 for a period of two years after the termination of his 9 employment. (Compl. at 5, ¶ 36.) Between 2005 and 2018, all 10 Individual Defendants received and acknowledged receipt of Zoom’s 11 employee handbook (“Employee Handbook”). (Compl. at 6, ¶ 37-45). 12 The handbook required employees to safeguard confidential 13 information and prohibited employees from removing, using, or 14 sending copies of any company records without prior approval of 15 the President of Zoom. Id. In 2019, Roe signed an employment 16 separation agreement and release (“2019 Separation Agreement”) 17 which prohibited Roe from making disparaging comments about Zoom 18 after his employment terminated. (Compl. at 7, ¶ 46.) 19 Defendant Roe founded Power in 2019. (Compl. at 8, ¶ 20 48.) While still employed with Zoom, Roe solicited Zoom’s 21 employees with job offers to work at Power. (Compl. at 8, ¶ 49.) 22 Before and after the Individual Defendants left Zoom for Power, 23 defendants “accessed, downloaded, and emailed Zoom’s confidential 24 information and/or trade secrets” (Compl. at 8, ¶ 50), including 25 customers’ lease information (Compl. at 8, ¶ 50(a), (d)), pricing 26 formulas (Compl. at 8, ¶ 50(b)), business plans (Compl. at 9, ¶ 27 50(c)), and files assigned to defendant Crossen. (Compl. at 9, ¶ 28 50(e).) Defendants accessed the information in a manner that 1 exceeded Zoom’s authorization. (Compl. 1, ¶ 54.) With Zoom’s 2 Confidential Information, defendants interfered with plaintiff’s 3 contracts with at least 74 customers. (Compl. at 10, ¶ 51.) 4 Further, by transmitting and conveying Zoom’s information, 5 defendants have diminished Zoom’s goodwill and standing among its 6 customers. (Compl. at 10, ¶ 52.) 7 Plaintiff alleges the following nine causes of action: 8 (1) breach of contract, (2) breach of implied covenant of good 9 faith and fair dealing, (3) violation of the California Uniform 10 Trade Secrets Act, (4) violation of the Defend Trade Secrets Act, 11 (5) intentional interference with contractual relations, (6) 12 violation of the Computer Fraud and Abuse Act, (7) breach of 13 fiduciary duty, (8) breach of loyalty, and (9) unfair business 14 practices. 15 II. Legal Standard 16 On a Rule 12(b)(6) motion, the inquiry before the court 17 is whether, accepting the well-pleaded allegations in the 18 complaint as true and drawing all reasonable inferences in the 19 plaintiff’s favor, the plaintiff has stated a claim to relief 20 that is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 21 662, 678 (2009). The court, however, is “not required to accept 22 as true allegations . . . that are merely conclusory, unwarranted 23 deductions of fact, or unreasonable inferences.” Seven Arts 24 Filmed Entm't, Ltd. v. Content Media Corp. PLC, 733 F.3d 1251 , 25 1254 (9th Cir. 2013). “The plausibility standard is not akin to 26 a ‘probability requirement,’ but it asks for more than a sheer 27 possibility that a defendant has acted unlawfully.” Id. 28 III. Discussion 1 A. Breach of Contract Claim (Count One) 2 Plaintiff’s claim for breach of contract arises out of 3 three documents: Defendant Roe’s 2017 Executive Agreement, 4 Defendant Roe’s 2019 Separation Agreement signed at the end of 5 his employment, and the Individual Defendants’ Employee Handbooks 6 received on dates ranging from 2005 to 2018. (Compl. at 12, ¶¶ 7 61, 62, 63.) 8 In California, to allege a cause of action for breach 9 of contract, plaintiff must plead “(1) the existence of a 10 contract, (2) defendant’s breach, (3) plaintiff’s performance or 11 excuse for nonperformance, and (4) the resulting damages to the 12 plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811 , 13 821 (2011). 14 Under Rule 10 of the Federal Rules of Civil Procedure, 15 “each claim founded on a separate transaction or occurrence . . . 16 must be stated in a separate count” if doing so “would promote 17 clarity.” Fed. R. Civ. P. 10(b). “Courts have required separate 18 counts where multiple claims are asserted, where they arise out 19 of separate transactions or occurrences, and where separate 20 statements will facilitate a clear presentation.” Bautista v. 21 Los Angeles Cty., 216 F.3d 837 , 840–41 (9th Cir. 2000). 22 Defendants object to plaintiff’s “lumping” of allegations related 23 to three different contracts under a single claim. (Motion to 24 Dismiss at 6). The court agrees the plaintiff must separate the 25 claims. 26 Plaintiff alleges the violation of three different 27 contracts by eight named defendants, and up to 100 unnamed ones. 28 Each of the contracts under this claim constitutes a separate 1 transaction or occurrence. Most obviously, some of the Employee 2 Handbook agreements were signed over a decade before Roe signed 3 the Executive Agreement in 2017, and the Individual Defendants 4 other than Roe are not parties to defendant Roe’s 2017 and 2019 5 agreements. Further, plaintiff has not alleged that defendant 6 Roe’s 2019 Agreement, which prevents Roe from making disparaging 7 comments about Zoom, modifies or is related to Roe’s 2017 8 Executive Agreement, which governed his confidentiality 9 obligations during his employment. The agreements at issue under 10 this claim are therefore separate transactions. 11 Stating the allegations for each contract in separate 12 counts is necessary for clarity and reviewability. This court 13 has previously dismissed complaints under Rule 10(b) where “the 14 claims do not identify which of the many factual allegations 15 apply to each specific claim.” Haney v. Bondoc, No. CV 1-0716 1222-GMS, 2009 WL 926887 , at *2 (E.D. Cal. Apr. 3, 2009). Such 17 is the case here. Under the “Breach of Contract” heading in the 18 Complaint, plaintiff indiscriminately incorporates paragraphs 1 19 through 59 of the Complaint, quotes each of the three agreements, 20 and then asserts that “the Individual Defendants materially 21 breached each and every one of the obligations described above 22 by, among other things, acquiring, disclosing and using Zoom’s 23 sensitive, confidential, and proprietary information and trade 24 secrets and failing to promptly return all of Zoom’s proprietary 25 information upon termination of each of their employment.” 26 (Compl. at 14, ¶ 68.) The allegations do not identify which 27 actions violated which contract. As it stands, the Complaint 28 precludes “meaningful review [of] the complaint,” Haney, 2009 WL 1 926887, at 2*, because the court cannot determine what the claims 2 purport to be or whether they are well-pleaded. Separation of 3 the allegations into separate counts is therefore necessary for 4 clarity. [5] B. Breach of Implied Covenant of Good Faith and Fair 6 Dealing (Count Two) 7 In California, there is “an implied covenant of good 8 faith and fair dealing in every contract that neither party will 9 do anything which will injure the right of the other to receive 10 the benefits of the agreement.” Reinhardt v. Gemini Motor 11 Transp., 879 F. Supp. 2d 1138, 1144 (E.D. Cal. 2012) (citing 12 Kransco v. Am. Empire Surplus Lines Ins. Co., 23 Cal.4th 390 , 400 13 (2000)). To plead a breach of the covenant of good faith and 14 fair dealing plaintiff must allege that “(1) the parties entered 15 into a contract; (2) the plaintiff fulfilled his obligations 16 under the contract; (3) any conditions precedent to the 17 defendant's performance occurred; (4) the defendant unfairly 18 interfered with the plaintiff's rights to receive the benefits of 19 the contract; and (5) the plaintiff was harmed by the defendant's 20 conduct.” Id. “Importantly, to state a claim for breach of the 21 implied covenant of good faith and fair dealing, a plaintiff must 22 identify the specific contractual provision that was frustrated.” 23 Ahmadi v. United Cont'l Holdings, Inc., No. 1:14-CV-00264-LJO, [24] 2014 WL 2565924 , at *6 (E.D. Cal. June 6, 2014) (citing Plastino 25 v. Wells Fargo Bank, 873 F.Supp.2d 1179, 1191 (N.D.Cal.2012). 26 The court must dismiss plaintiff’s claim because it 27 fails to identify the specific contractual provision frustrated [28] 1 by defendants’ conduct. See id.; Plastino, 873 F. Supp. 2d 1191 ; 2 Perez v. Wells Fargo Bank, N.A., No. C-11-02279 JCS, 2011 WL 3 3809808, at *18 (N.D. Cal. Aug. 29, 2011). Plaintiff merely 4 incorporates by reference all previous paragraphs, including the 5 three contracts. (Compl. at 15, ¶ 73.) Plaintiff then lists, in 6 one paragraph, around eight different collective actions by 7 defendants that allegedly breached the implied covenant of good 8 faith and fair dealing. (Compl. at 15, ¶ 75.) The Complaint 9 does not identify the contract or the provision the defendants’ 10 conduct frustrates. The court cannot evaluate, for example, what 11 the “benefits of the contract” are without a reference to the 12 contract. See Reinhardt, 879 F. Supp. 2d at 1144 ; see also, 13 e.g., Ahmadi, 2014 WL 2565924 , at *6 (identifying the benefits of 14 a contract to determine if plaintiff correctly alleges that 15 defendant’s conduct interfered with such benefits). The court 16 must therefore dismiss this claim. [17] C. Misappropriation of Trade Secrets in Violation of 18 the California Uniform Trade Secrets Act (Count Three) [19] To state a valid claim for misappropriation of trade [20] secrets under the California Uniform Trade Secrets Act (CUTSA), [21] Cal. Civ. Code §§ 3426 et seq., a plaintiff must allege that “(1) [22] the plaintiff owned a trade secret, (2) the defendant acquired, [23] disclosed, or used the plaintiff’s trade secret through improper [24] means, and (3) the defendant’s actions damaged the plaintiff.” [25] E. & J. Gallo Winery v. Instituut Voor Landbouw-En [26] Visserijonderzoek, No. 117CV00808DADEPG, 2018 WL 2463869 , at *3 [27] (E.D. Cal. June 1, 2018 (quoting Cytodyn, Inc. v. Amerimmune [28] 1 Pharm., Inc., 160 Cal. App. 4th 288, 297 (2008)). 2 Defendants do not contest that plaintiff has 3 sufficiently pleaded improper acquisition or disclosure of 4 alleged trade secrets, including, for example, disclosure of 5 information to defendant Power beyond the authorization granted 6 by the Employee Handbook. (Compl. at 17 ¶¶ 82, 86); cf. E. & J. 7 Gallo Winery, 2018 WL 2463869 , at *6 (“[B]ecause defendants were 8 allegedly given access to plaintiffs’ trade secrets pursuant to a 9 non–disclosure agreement, plaintiffs must plead facts which, if 10 proven to be true, would show that the defendant used the 11 information in a manner not authorized by the parties’ 12 agreement.”). Defendants also do not contest that the 13 allegations sufficiently plead damages. (See Compl. at ¶¶ 59, 14 88.) Defendants contest only whether plaintiff has sufficiently 15 identified the trade secrets at issue. 16 1. Identification of Trade Secrets -- Legal Standard [18] A “trade secret” under the CUTSA is defined as [19] “information, including a formula, pattern, compilation, program, [20] device, method, technique, or process that: (1) [d]erives [21] independent economic value, actual or potential, from not being [22] generally known to the public or to other persons who can obtain [23] economic value from its disclosure or use; and (2) [i]s the [24] subject of efforts that are reasonable under the circumstances to [25] maintain its secrecy.” Cal. Civ. Code § 3426.1 (d). [26] At the pleading stage, “a plaintiff need not ‘spell out [27] the details of the trade secret.’” Alta Devices, Inc. v. LG [28] 1 Elecs., Inc., 343 F. Supp. 3d 868, 881 (N.D. Cal. 2018) (quoting 2 Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 2265479 , at *5 3 (N.D. Cal. May 13, 2015)); see also E. & J. Gallo, 2018 WL 4 2463869, at *3. “To so require would mean that the complainant 5 would have to destroy the very thing for which he sought 6 protection by making public the secret itself.” TMX Funding, 7 Inc. v. Impero Techs., Inc., No. C 10-00202 JF (PVT), 2010 WL 8 2509979, at *3 (N.D. Cal. June 17, 2010). However, “the 9 complaint must do more than describe the subject matter of the 10 trade secrets in a ‘vague and conclusory’ manner.” E. & J. 11 Gallo, 2018 WL 2463869 , at *3 (quoting Bladeroom Grp. v. 12 Facebook, Inc., No. 5:15–cv–01370–EJD, 2015 WL 8028294 , at *3 13 (N.D. Cal. Dec. 7, 2015). The plaintiff must “describe the 14 subject matter of the trade secret with sufficient particularity 15 to separate it from matters of general knowledge in the trade or 16 of special persons who are skilled in the trade, and to permit 17 the defendant to ascertain at least the boundaries within which 18 the secret lies.” Alta Devices, 343 F. Supp. 3d at 881 . 19 2. Application 20 Plaintiff states that “in connection with its business, 21 Zoom has developed and/or acquired and maintained certain 22 business information, including, but not limited to, customer 23 contact information; pricing, costs, margins, and purchase 24 histories, supplier rates; information on customer likes, 25 preferences, dislikes, purchase patters and contract renewal 26 information; financial information concerning Zoom, and its 27 customers; comprehensive financing packages; internal employee 28 costs; and Zoom’s business, sales and marketing strategies and 1 plans (collectively the “Confidential Information”).” (Compl. at 2 4, ¶ 23.) Plaintiff does not claim, however, that all of this 3 Confidential Information constitutes trade secrets. Rather, 4 plaintiff alleges that the trade secrets at issue are part of 5 this Confidential Information. (Compl. at 17, ¶ 79 (“Zoom is/was 6 the rightful owner of the Confidential Information, including but 7 not limited to, trade secrets.”).) 8 Defendants argue that plaintiff’s allegations do not 9 sufficiently notify defendants of the “boundaries within which 10 the [trade] secret[s] lie” because the list of Confidential 11 Information is not exhaustive. The Confidential Information is 12 “business information, including, but not limited to” the items 13 listed. (Compl. at 4, ¶ 23 (emphasis added).) 14 When asked at oral argument where plaintiff has 15 identified the general categories or descriptions of the 16 purported trade secrets, counsel pointed to paragraph 86 of the 17 Complaint, which simply alleges “that defendants “used Zoom’s 18 trade secrets and other confidential business information . . . 19 including the use of valuable information regarding customers’ 20 contract particulars (including, without limitation pricing and 21 end date).” (Compl. at 18, ¶ 24.) That language neither 22 identifies the purported trade secrets nor clarifies the general 23 category of the purported trade secrets. Both the list of 24 Confidential Information and the language in paragraph 86 fail to 25 distinguish between the Confidential Information and the trade 26 secrets. Because the list of Confidential Information is not 27 exhaustive, and because the trade secrets are an unknown subset 28 of the indefinite Confidential Information, plaintiff does not 1 sufficiently identify anything. The Complaint gives defendants 2 no clue whatsoever about what information forms the basis of 3 plaintiff’s misappropriation claim. 4 Indeed, plaintiff’s factual allegations with respect to 5 the trade secrets at issue look like those that other courts have 6 deemed too vague. For example, in Space Data Corp. v. X, No. 16– 7 cv–03260–BLF, 2017 WL 5013363 , at *2 (N.D. Cal. Feb. 16, 2017), 8 the plaintiff purported to identify the trade secrets at issue by 9 alleging that they involved “data on the environment in the 10 stratosphere” and “data on the propagation of radio signals from 11 stratospheric balloon-based transceivers.” Id. The court 12 granted defendant’s motion to dismiss because plaintiff’s “high13 level overview” of its purported trade secrets was too vague. [14] Id. Zoom’s allegations are more vague than those in Space Data. 15 The Space Data plaintiff at least identified a general topic. 16 Zoom refers only to “business information” and “valuable 17 information.” (Compl. at 18, ¶¶ 23, 86). These allegations do 18 not sufficiently identify the trade secrets at issue. The court 19 must therefore dismiss this claim. 20 D. Defend Trade Secrets Act Claim (Count Four) 21 Under the Defend Trade Secrets Act (DTSA), “[a]n owner 22 of a trade secret that is misappropriated may bring a civil 23 action . . . if the trade secret is related to a product or 24 service used in, or intended for use in, interstate or foreign 25 commerce.” 18 U.S.C. § 1836 (b)(1). “The elements of 26 misappropriation under the DTSA are similar to those under the 27 CUTSA, except that the DTSA applies only to misappropriations 28 that occur or continue to occur on or after its date of enactment 1 on May 11, 2016.” Alta Devices, 343 F. Supp. 3d at 877 (internal 2 citations omitted). Therefore, to state a valid claim for 3 misappropriation of trade secrets under DTSA, a plaintiff must 4 allege that “(1) the plaintiff owned a trade secret, (2) the 5 defendant acquired, disclosed, or used the plaintiff’s trade 6 secret through improper means, and (3) the defendant’s actions 7 damaged the plaintiff.” E. & J. Gallo, 2018 WL 2463869 , at *3. 8 As in its response to plaintiff’s CUTSA claim, 9 defendants do not contest that plaintiff has sufficiently pleaded 10 improper acquisition or disclosure of alleged trade secrets. 11 Defendants also do not contest that plaintiff sufficiently 12 pleaded damages. Defendants contest only whether plaintiff has 13 sufficiently identified the trade secrets at issue. 14 “DTSA and the CUTSA share the same pleading 15 requirements for the identification of trade secrets.” Alta 16 Devices, 343 F. Supp. 3d at 881 . Because plaintiff’s allegations 17 were not sufficiently particular under the CUTSA, they are also 18 insufficient under the DTSA. See id. at 881-82 (finding 19 sufficient particularity under both statutes simultaneously). 20 The court therefore will dismiss this claim. 21 E. Common Law Claims 22 Defendant argues that plaintiff’s four common law 23 claims for intentional interference with contractual relations, 24 breach of fiduciary duty, breach of loyalty, and unfair business 25 practices are preempted by the CUTSA and must be dismissed. 26 Because the CUTSA has a “‘comprehensive structure and 27 breadth, courts have found ‘that breadth suggests a legislative 28 intent to preempt the common law.’” Copart, Inc. v. Sparta 1 Consulting, Inc., 277 F. Supp. 3d 1127, 1156 (E.D. Cal. 2017) 2 (internal citations omitted) (quoting AccuImage Diagnostics Corp. 3 v. Terarecon, Inc., 260 F. Supp. 2d 941, 953 (N.D. Cal. 2003); 4 I.E. Assocs. v. Safeco Title Ins. Co., 39 Cal. 3d 281 , 285 5 (1985)). 6 The CUTSA includes an express preemption provision. [7] Cal. Civ. Code § 3426.7 . The provision “expressly allows 8 contractual and criminal remedies, whether or not based on trade 9 secret misappropriation.” Copart, 277 F. Supp. 3d at 1157 10 (quoting K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, 11 Inc., 171 Cal.App.4th 939, 954 (2009)). “At the same time, § 12 3426.7 implicitly preempts alternative civil remedies based on 13 trade secret misappropriation.” Id. (quoting K.C. Multimedia, [14] 171 Cal.App.4th at 954 ). 15 “[T]he determination of whether a claim is based on 16 trade secret misappropriation is largely factual.” Deerpoint 17 Grp., Inc. v. Agrigenix, LLC, 345 F. Supp. 3d 1207, 1236 (E.D. 18 Cal. 2018 ) (quoting Angelica Textile Servs., Inc. v. Park, 220 19 Cal.App.4th 495 , 505 (2013)). The CUTSA preempts civil, non20 contract claims “based on the same nucleus of facts as trade 21 secret misappropriation.” Id. “In other words, preemption 22 generally applies where there is no material distinction between 23 the wrongdoing underlying the CUTSA claim and the non-CUTSA 24 claim.” Ikon, 2010 WL 5129293 , at *3. “Preemption is not 25 triggered where the facts in an independent claim are similar to, 26 but distinct from, those underlying the misappropriation claim.” 27 Farmers Ins. Exch. v. Steele Ins. Agency, Inc., No. 2:13-CV28 00784-MCE, 2013 WL 3872950 , at *7 (E.D. Cal. July 25, 2013). To 1 avoid preemption, plaintiff’s common law claims must therefore be 2 “based on more than just the misappropriation of Plaintiffs' 3 trade secrets.” Leatt Corp. v. Innovative Safety Tech., LLC, No. 4 09-CV-1301-IEG (POR), 2010 WL 2803947 , at *6 (S.D. Cal. July 15, 5 2010). If a claim is not preempted under the CUTSA, the court 6 must then evaluate whether the allegations sufficiently state a 7 claim. See Ikon, 2010 WL 5129293 , at *3. [8] 1. Intentional Interference with Contractual 9 Relations (Count Five) 10 a. Preemption 11 Plaintiff alleges that defendants “intended to 12 interfere” with Zoom’s contractual relationships. (Compl. at 22, 13 ¶ 109.) Plaintiff’s claim certainly relies, at least in part, on 14 its allegations of trade secret misappropriation. Plaintiff 15 incorporates paragraphs 1 through 105 (Compl. at 22, ¶ 107), and 16 alleges that “customers were solicited to transfer their account 17 to Power utilizing Zoom’s confidential information and trade 18 secrets” (Compl. at 23, ¶ 114). These allegations rely on the 19 theft of trade secrets, so any action relying on these 20 allegations is preempted by the CUTSA. 21 However, allegations in plaintiff’s complaint, which 22 for some reason plaintiff’s counsel apparently disavowed at oral 23 argument, also include that defendant Roe lied to Toshiba, then a 24 Zoom equipment provider, about Zoom’s parent company Xerox 25 shutting down all Zoom operations. (Compl. at 24, ¶ 115). Roe 26 allegedly contacted Toshiba to communicate that “Zoom was closed 27 and would no longer be able to service any customers with Toshiba [28] 1 equipment.” (Compl. at 27, ¶ 132.) 2 Plaintiff’s allegations sufficiently plead wrongful 3 conduct distinct from the alleged misappropriation of trade 4 secrets. Roe’s alleged lying to Toshiba is not part of 5 plaintiff’s misappropriation allegations and does not rely on 6 defendants using the misappropriated information. “Because this 7 allegation arises from facts different from the claim of 8 misappropriation of trade secrets, the claim is not preempted by 9 CUTSA” to the extent that it relies on non-theft allegations. 10 Ikon, 2010 WL 5129293 , at *4; Copart, 277 F. Supp. 3d at 1160 . 11 b. Sufficiency of Pleadings 12 To plead a cause of action for intentional interference 13 with contractual relations, plaintiff must allege “(1) a valid 14 contract between plaintiff and a third party; (2) defendant's 15 knowledge of this contract; (3) defendant's intentional acts 16 designed to induce a breach or disruption of the contractual 17 relationship; (4) actual breach or disruption of the contractual 18 relationship; and (5) resulting damage.” Walters v. Fid. Mortg. 19 of CA, 730 F. Supp. 2d 1185, 1210 (E.D. Cal. 2010). 20 Plaintiff fails to sufficiently plead this claim. 21 First, plaintiff does allege the existence of valid contractual 22 relationship with Toshiba. (Compl. at 22, ¶ 108; 24, ¶ 115.) 23 Second, defendants were allegedly aware of this contract. 24 (Compl. at 23, ¶ 115.) Defendants’ statements to Toshiba that 25 Zoom would “no longer be able” to service customers with Toshiba 26 equipment shows awareness of an existing contractual 27 relationship. (Id.) Plaintiff thus satisfies the first and 28 second prongs. 1 Third, plaintiff satisfies the third prong because it 2 sufficiently alleges intentional acts designed to disrupt the 3 contractual relationship. Plaintiff pleads that defendants told 4 Toshiba false information about Zoom to get Toshiba “to authorize 5 Power as a distributor in the same geographic area as Zoom,” to 6 “undercut Zoom’s business model,” and “to divert Zoom’s existing 7 customers to Power.” (Id.) Interference is “certain or 8 substantially certain to occur” where defendants tell Zoom’s 9 client that Zoom would no longer provide a service. See Walters, [10] 730 F. Supp. 2d at 1210 . 11 Plaintiff, does not satisfy the fourth prong, however, 12 because it does not allege actual breach of Toshiba’s contract 13 with Zoom. Plaintiff alleges only that Power obtained better 14 pricing terms from Toshiba than Zoom. (Compl. at 24, ¶ 115.) 15 Plaintiff does not allege that Toshiba or plaintiff breached any 16 of the terms in their contract. Because plaintiff fails to 17 satisfy the actual breach requirement, plaintiff has failed to 18 state a claim for intentional interference with contractual 19 relations. The court will therefore dismiss this claim. 20 2. Breach of Fiduciary Duty (Count Seven) 21 a. Preemption 22 According to plaintiff, defendants breached their 23 fiduciary duties not to “misappropriate trade secrets or 24 confidential information, solicit employees to leave their 25 employment, or assist potential competitors.” (Compl. at 26, ¶ 26 130.) Defendants allegedly solicited Zoom’s employees, promised 27 Zoom’s employees certain salaries and business opportunities, 28 sought business opportunities for Power, instructed Zoom’s 1 customers to cancel Zoom’s service, and modified financial 2 arrangements to ease in transfer of accounts to power. Also, Roe 3 allegedly lied and pitched preferred pricing terms to Toshiba. 4 (Compl. at 27, ¶ 132.) Defendants allegedly committed these acts 5 “while still working for Zoom.” (Id.) 6 Most of plaintiff’s allegations rely on the same 7 wrongful conduct alleged under the misappropriation of trade 8 secrets claim. According to plaintiff, defendants “used the 9 confidential information . . . to solicit employees from Zoom’s 10 current employees.” (Compl. at 18, ¶ 86.) Defendants allegedly 11 also “used the confidential information . . . to solicit business 12 for their own benefit.” (Id.) Similarly, defendants relied on 13 “confidential lease information for an existing Zoom customer” to 14 give the customer “detailed instructions” to “cancel services 15 with Zoom.” (Compl. at 8, ¶ 50(a).) Finally, that same 16 confidential lease information was used to “unbundl[e]” the 17 customer “to facilitate transfer to Power.” (Id.) None of these 18 factual allegations rely on “non-theft related allegations.” See 19 Copart, 277 F. Supp. 3d at 1160 . 20 Roe’s alleged lie to Toshiba, however, constitutes a 21 wrongful action by defendant independent of the misappropriation 22 allegations. Plaintiff states that “Roe represented to Toshiba 23 that Zoom was closed and would no longer be able to service any 24 customers with Toshiba equipment in order to mislead Toshiba into 25 agreeing to authorize Power as a distributor in the same 26 geographic area as Zoom, and to provide Power with lower, 27 preferred pricing terms compared to those available to Zoom.” 28 (Compl. 27, at ¶ 132.) Plaintiff thus alleges two acts. First, 1 Roe spread false and damaging information about his employer to 2 Toshiba. Second, Roe offered Toshiba a deal he knew would be 3 competitive because he knew the details of Toshiba’s deal with 4 Zoom. The complaint does not suggest that defendant referenced 5 the stolen information to lie to Toshiba, but it does describe 6 defendant’s undercutting of Zoom’s prices with the use of the 7 misappropriated information. (Compl. at 16, ¶ 75.) “In 8 construing these facts in the light most favorable to Plaintiff 9 as required under Rule 12(b)(6),” Roe’s alleged prejudicial 10 lying, separate from his pricing offers to Toshiba, “can form an 11 independent nucleus for a breach of fiduciary duty claim.” See 12 Ali, 544 F. Supp. 2d at 1070. 13 b. Sufficiency of the Pleadings 14 “The elements of a breach of fiduciary duty claim are 15 (1) existence of a fiduciary relationship; (2) breach of the 16 fiduciary duty; and (3) damage proximately caused by that 17 breach.” Lane v. Vitek Real Estate Indus. Grp., 713 F. Supp. 2d 18 1092, 1104 (E.D. Cal. 2010). Plaintiff pleads this cause of 19 action against defendants Roe, Ramsay, Neal, and Toon. However, 20 because the only allegations that can sustain this claim involve 21 only Roe, the court dismisses this claim against Ramsay, Neal, 22 and Toon, and evaluates this claim only as to Roe’s conduct. 23 i. Fiduciary Relationship 24 Plaintiff adequately alleges the existence of a 25 fiduciary relationship with Roe. Employers have fiduciary 26 relationships with corporate officers and members of the 27 employer’s board of directors as a matter of law. Rita Med. 28 Sys., Inc. v. Resect Med., Inc., No. C 05-03291 WHA, 2007 WL 1 161049, at *6 (N.D. Cal. Jan. 17, 2007). Roe was a corporate 2 officer and therefore had a fiduciary relationship with Zoom. 3 (See Compl. at 4, ¶ 28.) 4 ii. Breach of Duty 5 Plaintiff sufficiently alleges Roe’s breach of 6 fiduciary duty. According to plaintiff, Roe “represented to 7 Toshiba that Zoom was closed and would no longer be able to 8 service any customers with Toshiba equipment,” contrary to the 9 interests of his employer, Zoom. (Compl. at 27, ¶ 132.) 10 Plaintiff’s allegations thus satisfy the second prong. Cf. Buick 11 v. World Sav. Bank, 565 F. Supp. 2d 1152, 1159 (E.D. Cal. 2008) 12 (finding a breach where plaintiff alleged that defendant 13 “knowingly acted against plaintiffs' best interests and instead 14 acted on behalf of World whose interests were adverse to 15 plaintiffs.”). 16 iii. Damages 17 Plaintiff alleges damages stemming from Roe’s lies to 18 Toshiba, including Toshiba’s authorization of Power as a 19 distributor in the same geographic area as Zoom and the damages 20 caused by such authorization. (Compl. at 27, ¶¶ 132, 133.) 21 Plaintiff thus has sufficiently pleaded a claim for breach of 22 fiduciary duty against defendant Roe. 23 3. Breach of Loyalty (Count Eight) 24 a. Preemption 25 Plaintiff allegations under this claim are very similar 26 to those under the breach of fiduciary duty claim. This court 27 finds no reason to conclude differently here: plaintiff’s 28 allegation that Roe, during his employment at Zoom, lied to 1 Toshiba about Xerox closing all Zoom operations is a wrongful 2 action independent of the theft of information. This claim 3 therefore is not preempted by the CUTSA to the extent that it 4 relies on non-theft allegations. See Copart, 277 F. Supp. 3d at 5 1160. As before, because the only allegations independent of the 6 theft allegations involve only Roe, the court dismisses this 7 claim against defendants Ramsay, Neal, and Toon, and considers 8 the sufficiency of the allegations only as to Roe. 9 b. Sufficiency of Pleadings 10 California Labor Code § 2863 imposes on employees a 11 duty of loyalty to their employer. Pollara v. Radiant Logistics 12 Inc, No. CV 12-0344 GAF (SPX), 2013 WL 12113385 , at *7 (C.D. Cal. 13 May 30, 2013.) Section 2863 requires any “employee who has any 14 business to transact in his own account, similar to that 15 entrusted to him by his employer, [to] always give the preference 16 to the business of the employer.”1 17 To state a claim for breach of the duty of loyalty, a 18 plaintiff must plead: “(1) the existence of a relationship giving 19 rise to a duty of loyalty; (2) one or more breaches of that duty; 20 and (3) damage proximately caused by that breach.” E.D.C. 21 Techs., Inc. v. Seidel, 216 F. Supp. 3d 1012, 1016 (N.D. Cal. 22 2016). [23] 24 1 Plaintiff also alleges that defendants breached the duty of loyalty imposed under California Labor Code § 2860. [25] (Compl. at 27, ¶ 136.) Section 2860 forbids employees from keeping anything acquired “lawfully or unlawfully” during or [26] after their employment. Cal. Lab. Code. § 2860. A claim for a 27 violation of this section relies only on theft allegations, so it is preempted by the CUTSA. This court therefore proceeds only 28 under the duty of loyalty imposed under Section 2863. 1 Plaintiff sufficiently pleads this claim. First, 2 plaintiff alleges the existence of an employer-employee 3 relationship between Zoom and Roe. (Compl. at 27, ¶ 135.) Such a 4 relationship gives rise to a duty of loyalty and satisfies the 5 first prong. E.D.C. Techs., 216 F. Supp. 3d at 1016 (“California 6 courts . . . use[ ] broad language suggesting that all employees 7 owe a duty of loyalty to their employers.”) 8 Second, plaintiff also claims at least one breach of 9 that duty in its allegations that Roe, during his employment with 10 Zoom, called Toshiba to lie about Xerox shutting down all Zoom 11 operations. (Compl. at 27, ¶ 132.) Roe failed to “give the 12 preference to the business of [his] employer” because he lied to 13 his employer’s client to make his new business look more 14 favorable. Plaintiff’s allegations therefore satisfy the second 15 prong. 16 Third, plaintiff alleges damages stemming from 17 defendant’s lying, including Toshiba’s authorization of Zoom’s 18 competitor as a distributor and the economic damages caused by 19 such authorization. (Compl. at 27, ¶¶ 132, 133.) Plaintiff thus 20 satisfies the third prong has sufficiently pleaded a claim for 21 breach of duty of loyalty against Roe. [22] 4. Unfair Business Practices in Violation of the 23 California Unfair Competition Law (Count Nine) – Preemption [24] California’s Unfair Competition Law “establishes three [25] varieties of unfair competition -- acts or practices which are [26] unlawful, or unfair, or fraudulent. An act can be alleged to [27] violate any or all of the three prongs of the UCL.” Herron v. [28] 1 Best Buy Co. Inc., 924 F. Supp. 2d 1161, 1168 (E.D. Cal. 2013); [2] Cal. Bus. & Prof. Code § 17200 et seq. Zoom alleges that 3 defendants acted unlawfully and unfairly, but not fraudulently. 4 Plaintiff’s claim that defendants acted unlawfully is 5 explicitly based on the same nucleus of facts as trade secret 6 misappropriation. According to plaintiff, defendants acted 7 unlawfully because they acted in violation of the CUTSA. The 8 claims are thus identical and “there is no material distinction 9 between the wrongdoing underlying” the two claims. See Ikon, [10] 2010 WL 5129293 , at *3. The CUTSA thus preempts this claim. 11 Plaintiff’s claim that defendants acted unfairly 12 similarly relies on the same wrongful actions as those under the 13 misappropriation claim. Defendants allegedly acted unfairly 14 because violated “violate[d] laws governing confidential, 15 proprietary, and trade secret information,” and “use[d] Zoom’s 16 confidential and proprietary business information” to solicit 17 employees and customers. (Compl. at 29, ¶ 145.) Plaintiff’s 18 claim here, like its CUTSA claim, relies on the access, download, 19 and emailing of Zoom’s confidential information, and is therefore 20 preempted under the CUTSA. F. Computer Fraud and Abuse Act Claim (Count Six) [21] The Computer Fraud and Abuse Act (CFAA), 18 U.S.C § [22] 1030, “prohibits a number of different computer crimes, the [23] majority of which involve accessing computers without [24] authorization or in excess of authorization, and then taking [25] specified forbidden actions, ranging from obtaining information [26] to damaging a computer or computer data.” LVRC Holdings LLC v. [27] Brekka, 581 F.3d 1127, 1131 (9th Cir. 2009). [28] 1 The CFAA permits “[a]ny person who suffers damage or 2 loss by reason of a violation of this section [to] maintain a 3 civil action against the violator to obtain compensatory damages 4 and injunctive relief or other equitable relief.” 18 U.S.C. § 5 1030(g). Such a civil action, however, “may be brought only if 6 the conduct involves 1 of the factors set forth in subclauses 7 (I), (II), (III), (IV), or (V) of subsection (c)(4)(A)(i).” Id. 8 To state a private cause of action, a plaintiff therefore must 9 allege “that the defendant violated one of the provisions of § 10 1030(a)(1)-(7), and that the violation involved one of the 11 factors listed” in § 1030(c)(4)(A)(1).2 Brekka, 581 F.3d at 12 1131. 13 Plaintiff brings this claim based on a violation of 18 14 U.S.C. 1030(a)(2)(C). (Compl. at 26, ¶ 125.) To successfully 15 bring such a claim, plaintiff must show that defendants: (1) 16 intentionally accessed a computer, (2) without authorization or 17 exceeding authorized access, and that they (3) thereby obtained 18 information (4) from any protected computer. Plaintiff must also 19 show that one of the factors listed under § 1030(c)(4)(A)(1) [20] 2 Factors in § 1030(c)(4)(A)(1) include: (i) loss to 1 or [21] more persons during any 1–year period (and, for purposes of an 22 investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of 23 conduct affecting 1 or more other protected computers) aggregating at least $5,000 in value; (ii) the modification or 24 impairment, or potential modification or impairment, of the medical examination, diagnosis, treatment, or care of 1 or more [25] individuals; (iii) physical injury to any person; (iv) a threat to public health or safety; or (v) damage affecting a computer [26] system used by or for a government entity in furtherance of the 27 administration of justice, national defense, or national security. 18 U.S.C. § 1030 (c)(4)(A)(1). [28] 1 applies. See Brekka, 581 F.3d at 1132 . 2 i. Intentional Access 3 Plaintiff alleges that “Roe intentionally accessed 4 valuable Zoom information” stored in a computer, as did Ramsay, 5 Toon, and Neal. (Compl. at 25, ¶ 120.) Plaintiff further 6 alleges that defendants accessed the computer to email Power 7 protected information, which may evidence intent to access. 8 (Compl. at 25, ¶ 125.) Taking the allegations to be true, 9 plaintiff successfully pleads defendants’ intentional access of a 10 computer. 11 ii. Lacking or Exceeding Authorization 12 “The CFAA is an ‘anti-hacking’ statute and not a 13 misappropriation statute.” Hat World, Inc. v. Kelly, No. CIV. S14 12-01591 LKK, 2012 WL 3283486 , at *5 (E.D. Cal. Aug. 10, 2012) 15 (quoting United States v. Nosal, 676 F.3d 854, 860 (9th Cir. 16 2012)). “The plain language of the CFAA ‘target[s] the 17 unauthorized procurement or alteration of information, not its 18 misuse or misappropriation.’” Nosal, 676 F.3d at 863 . Therefore, 19 in the Ninth Circuit, “the phrase ‘exceeds authorized access’ in 20 the CFAA does not extend to violations of use restrictions.” Id. 21 Plaintiff alleges that defendants accessed confidential 22 business information “in a manner that exceeded [each 23 defendant’s] original authorization.” (Compl. at 25, ¶ 120.) 24 Defendants Roe, Ramsay, Neal, and Toon, however, were each 25 “permitted access to . . . Zoom’s trade secrets in Zoom’s efforts 26 to facilitate the delivery of Zoom’s services . . ., subject to 27 the terms set forth in the Employee Handbook.” (Compl. at 17, ¶¶ 28 82-85.) Plaintiff thus pleads that the Employee Handbook 1 restricted defendants’ use of the trade secrets, not defendants’ 2 access to them. 3 Because plaintiff does not plead that defendants were 4 not authorized to access the confidential information, plaintiff 5 fails to satisfy this prong. The court in Nosal considered facts 6 similar to the ones at hand. Defendant David Nosal worked for an 7 executive search firm. 676 F.3d at 856 . “Shortly after [Nosal] 8 left the company, he convinced some of his former colleagues who 9 were still working [there] to help him start a competing 10 business.” Id. “The employees [then] used their log-in 11 credentials to download source lists, names and contact 12 information from a confidential database on the company's 13 computer, and then transferred the information to Nosal.” Id. 14 Just as plaintiff alleges here, “[t]he employees were authorized 15 to access the database, but [the company] had a policy that 16 forbade disclosing confidential information.” Id. The Ninth 17 Circuit rejected the government's argument that the CFAA's phrase 18 “exceeds authorized access” “could refer to someone who has 19 unrestricted physical access to a computer, but is limited in the 20 use to which he can put the information.” Id. at 867 . Instead, 21 the court found that an employee’s unauthorized disclosure or use 22 of information to which an employer has given an employee access 23 is alone insufficient to entertain a claim under CFAA. 24 This court concluded the same in Farmers Insurance 25 Exchange v. Steele Insurance Agency, No. 2:13-CV-00784-MCE, 2013 26 WL 3872950 , at *19 (E.D. Cal. July 25, 2013). Defendant McCarren 27 “accessed Farmers' computer system to download information 28 regarding Farmers' policyholders, including his entire customer 1 list, for the purpose of using this information after termination [2] of his Agency Appointment Agreement.” Id. at *2. Because [3] defendant “had permission to access Farmers' confidential [4] proprietary information . . .,” this court concluded that [5] “Defendant McCarren did not ‘exceed authorized access’ by [6] accessing such information, although he may have used such [7] information for an improper purpose.” Id. at *19. See also, [8] Quad Knopf, Inc. v. S. Valley Biology Consulting, LLC, No. 1:139 CV-01262 AWI, 2014 WL 1333999 , at *4 (E.D. Cal. Apr. 3, 2014) [10] (finding that defendants did not exceed authorized access where [11] defendants “were not permitted . . . to disseminate the [12] information,” but nonetheless “clearly had permission to access [13] the work product or other electronically stored information.”). [14] Accordingly, plaintiff has failed to state facts sufficient to [15] allege the second prong of § 1030(a)(2)(C) against all [16] defendants. The Complaint therefore does not state a cause of [17] action under the CFAA upon which relief can be granted. [18] IT IS THEREFORE ORDERED that defendants’ Motion to [19] Dismiss (Docket No. 23) be, and the same hereby is, GRANTED IN [20] PART as to the following claims: (1) breach of contract; (2) [21] breach of implied covenant of good faith and fair dealing; (3) [22] misappropriation of trade secrets in violation of the CUTSA; (4) [23] misappropriation of trade secrets in violation of the DTSA; (5) [24] intentional interference with contractual relations; (6) breach [25] of fiduciary duty against defendants Ramsay, Neal, and Toon; (7) [26] breach of duty of loyalty against defendants Ramsay, Neal, and [27] Toon; (8) unfair business practices; and (9) violation of the [28] 1 CFAA, 2 IT IS FURTHER ORDERED that defendants’ Motion to 3 Dismiss be, and the same hereby is, DENIED IN PART as to the 4 following claims: (1) breach of fiduciary duty against defendant 5 Roe; and (2) breach of duty of loyalty against defendant Roe. 6 Zoom has twenty days from the date this order is signed 7 to file a First Amended Complaint, if it can do so consistent 8 | with this Order. 9 | Dated: November 8, 2019 bette 2d. □□ 10 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE